UK - Recent pension reforms has reduced the average value of public sector pension schemes to 21% of salary, although this is still around three times higher than the average private sector defined contribution (DC) scheme, the Pensions Policy Institute has revealed.

In an 'Assessment of the Government's reforms to public sector pensions', the PPI highlighted changes to public sector pensions, such as raising the normal pension age to 65 for new entrants, introducing tiered contributions and implementing cost-sharing and cost-capping, meant of the seven public schemes the average value had dropped 3% from 24% to 21%.

However, the PPI stressed the "precise effects of the reforms vary from scheme to scheme", so although the average of the four main public sector schemes - for the NHS, Civil Service, Teachers and Local Government - reduced in value from 23% to 20%, the effect on the uniformed services funds was different, as the police fund drops from 35% to 29%, the fire service scheme falls from 35% to 24% and the armed forces scheme reduces in value by 1% from 39% to 38%.

Despite this apparent loss in value, the research also showed while the average value of a public sector scheme is on a par with a medium private sector defined benefit (DB) scheme at 20%, the average value of a DC pension is just 7% of salary.

The PPI suggested the reformed public sector pension schemes are "substantially more valuable than the average DC schemes, which are becoming more and more prevalent in the private sector" and it warned the gap between public and private pensions could continue to grow if "the shift from DB to DC continues in the private sector, and the average contribution rate in DC schemes does not increase".

In addition, the PPI research said the reforms of the public sector pensions, such as increasing the normal pension age have "been offset by other aspects of reform", and highlighted that the annual cost to the taxpayer of unfunded schemes - which excludes the LGPS - is predicted to increase by 40% in the next 20 years from 1% in 2007/08 to 1.4% in 2027/28.

The PPI also pointed out the government projects the current reforms to the NHS, Civil Service and Teachers' schemes will save £13bn over a 50 year period, yet these employers contribute around £10bn a year into these three schemes,

However findings from the PPI research, which seeks to be impartial and to inform the debate on pension reforms, showed the government's plans to implement cost-sharing and cost-capping to the civil service, teachers' and NHS schemes - with the LGPS expected to follow - could place a "disproportionate" burden on the member.

At the moment the employers pay two-thirds of the costs, but it will move to a 50:50 share, which means any future increases in scheme costs will fall "disproportionately on members", while the cap on contributions is close to the current employer contribution levels so any "unanticipated" increases - such as a one year increase in longevity - could fall solely on the member in the form of increased contribution rates or reduced benefits.

Niki Cleal, director of the PPI, said: "It is often assumed that better pensions in the public sector make up for lower pay. Although a job-for-job type comparison of pay is difficult to make between the sectors, the evidence suggests that the picture is more complex than this."

In response to the report Brendan Barber, general secretary of the Trades Union Congress (TUC), said: "The problem is not fair and proper public sector pensions, but the retreat by private sector employers form their responsibilities. The solution is to level-up not strip away pensions from vital public servants," he added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com